Govt may cap FDI in pharma at 49%

The finance ministry as well as the Planning Commission have advised the concerned ministries to expedite the process to ensure that 65 per cent of Indians, who according to the WHO still lack access to essential medicines, are not deprived of affordable and high-quality medicines.

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Sanjay Singh

New Delhi

September 6, 2010

UPDATED: September 6, 2010 12:44 IST

Fearing uncontrolled mergers and acquisitions (M&As) by foreign drug firms that could lead to further increase in drug prices and also cartelisation, the government is eyeing capping the 100 per cent foreign direct investment (FDI) currently allowed through automatic route in the pharma sector at 49 per cent and that too through the government route.

The finance ministry as well as the Planning Commission have advised the concerned ministries to expedite the process to ensure that 65 per cent of Indians, who according to the World Health Organisation (WHO) still lack access to essential medicines, are not deprived of affordable and high-quality medicines.

Earlier this year, Piramal Healthcare sold its domestic formulations business to US-based Abbot for Rs 17,353 crore.

This is the second-biggest acquisition of an Indian drug firm, after the country's largest drug maker Ranbaxy was acquired by Japan's Daiichi Sankyo for Rs 21,574 crore in 2008.

Concerned that acquisition of Indian pharma firms by multinational corporations (MNCs) was impacting the availability of low-cost medicines, the commerce and industry ministry, which formulates FDI norms had proposed tightening the rules so that Indian acquisitions by MNCs flow through it and not through the automatic route.

It had also mooted the idea of offering licenses to domestic firms to produce patented drugs to protect consumers' interests.

The commerce ministry has also come out with a discussion paper on "Compulsory Licensing"-a system whereby a third party other than the patent holder is allowed to produce and market a patented product or process-for formulating a coherent and concerted approach. The discussion paper seeks views from all stakeholders by this month-end.

Several developed and developing countries have introduced compulsory licensing. But these licenses under WTO norms have not taken off in India yet due to the absence of manufacturing facilities. Currently, a large part of the cancer drugs sold in India are patented and manufactured by MNCs such as Novartis, GSK and Roche, which cost over a lakh for a month-long treatment making these drugs unaffordable for the Indian population.

The paper also points at legal provisions and other related aspects of patent laws in India. It suggests the introduction of a compulsory licensing system to put a check on spiralling drug prices. It has also suggested measures to make available affordable drugs within the ambit of the National Pharmaceutical Pricing Authority (NPPA) by expanding the number of drugs from its current scrutiny of pricing of 74 drugs. Another option could be by invoking the Competition Act, 2002.

The health ministry has also objected to lobbying by global drugmakers to change India's intellectual property rules.

The Prime Minister's Office (PMO) had circulated a note based on views by global drugmakers that seeks changes such as legislative review of India's patent laws, data exclusivity and implementation of patent linkages.

If implemented, the proposals can have a huge bearing on the grant of patents in India, affecting the cost of treatment.

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